YES Bank net up 21.4% on core income

Net interest income increases 14% to Rs 665 cr

Healthy growth in loans, coupled with write-back of provisions towards the bond portfolio, helped YES Bank report a 21.4 per cent rise in net profit at Rs 415.6 crore for the quarter ended December.

Net interest income increased 14 per cent to Rs 665 crore on the back of 15 per cent loan growth, while the net interest margin remained stable at 3.9 per cent. Non-interest income rose 24 per cent.

The bank expects the Reserve Bank of India to maintain status quo in the policy rate in the third-quarter review of monetary policy scheduled for January 28.

“We may see an uptick in net interest margins if the current economic environment prevails,” said Rajat Monga, chief financial officer and group president (financial markets).

As yields softened, the bank also gained from lower write-back of provisions towards the bond portfolio at Rs 56 crore. Total provisioning stood at Rs 13 crore, compared with Rs 57 crore in the year-ago period.

The lender continued to see healthy growth in low-cost deposits, which rose 38 per cent year-on-year and accounted for 20.9 per cent of the total deposits. “We hope to see 1-1.5 per cent growth in Casa (current account and savings account) in total deposits every quarter,” Monga said.

As of December 31, 2013, gross non-performing advances, as a proportion of gross advances, was 0.39 per cent, while net non-performing advances, as a proportion of net advances, stood at 0.08 per cent. “Fresh slippages are about 25 basis points of loans; in absolute terms, these stood at Rs 130-140 crore during the quarter,” Monga said.

The bank sold bad loans of Rs 15-16 crore to an asset reconstruction company.

YES Bank’s cost-to-income ratio rose to 41.6 per cent from 37.2 per cent a year ago, owing to a one-time fee payment for fund-raising activities. Monga said the ratio was likely to stabilise at about 40 per cent.

The bank is consolidating its mid-corporate loan book and focusing on the retail portfolio.

During the December 2013 quarter, corporate and institutional banking accounted for 68 per cent of the customer assets portfolio, while commercial banking accounted for 14.7 per cent and retail banking (including medium and small enterprises) accounted for 17.3 per cent.

“YES Bank managed the last two years of this downturn very well, in terms of moderate growth and managing asset quality. If it is able to continue this for another couple of quarters, which we think it will, whenever growth resumes to the system, its growth rates will again start outperforming the industry,” broking firm Motilal Oswal said in a report.